South African Local Government Association Annual Report 2006/07 briefing

11 February 2008

Chairperson: Mr S Tsenoli (ANC)

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Meeting Summary

The South African Local Government Association briefed the Committee on the Annual Report 2006/07. The Association ran six programmes and the scope, achievements and challenges of each were highlighted. These included capacity and management constraints. The Association was addressing issues and would be continuing to strive to deliver efficient and effective service. There had been a disclaimer from the Auditor General in the past year, due the disjoined way in which the Association was still functioning. There were inadequate document management systems, capacity constraints, non-responsive financial systems and decentralised financial functions. The Association was trying to achieve a turnaround. In so far as the financial performance was concerned, revenue and total income had increased, and expenditure had decrease and the Association was solvent. There had been under spending as against budget, because certain contracts were not finalized and accommodation not secured. The corrective measures being taken to deal with each of the disclaimer items were set out.

Members queried why issues of sustainability had not been addressed, suggested that p[political and administrative issues must be separated, and queried gender and disability policies and performance. Further questions were asked on the remuneration of councillors, the communication between the Association and its members, its capacity to support and advise its members, and its financial capacity to implement policies and changes. The role and functioning of the audit committee, the apparent inability to support the five-year plan, the role being played in the current energy crisis and the high staff turnover were also discussed. Members were of the view that the Association must improve its communication with its own members and the Portfolio Committee. Further questions could not be addressed in the meeting due to shortage of time, but Members were asked to raise issues with the Association.

Meeting report

The Chairperson noted with concern that the venue in which the meeting was held did not have sufficient wheelchair access, therefore preventing a Member from attending.The lack of disability facilities was a grave concern, and a complaint would be lodged.

South African Local Government Association (SALGA): Annual Report 2006/07 Briefing Mr Xolile George, CEO: SALGA, guided the Committee through his slide presentation on the Annual Report. He drew the Committee’s attention to the different areas of focus SALGA had identified in the past financial year, and the successes, failures and priorities of all these different areas. He summarised the main activities in each of the programmes into which SALGA was divided (see attached presentation).

Mr George further noted SALGA’s role not only on a local level but on regional and international levels as well. He noted that despite progress, SALGA still faced many challenges. Specific areas of difficulty had been listed for each of the programmes, and included capacity and management constraints. He promised that in the next year it would strive to overcome these challenges and aim for efficient and effective service.

The presentation then moved on to address issues of capacity and communication, efficiency and transformation.Topical issues such as disability and gender division were also covered.

A financial overview was given, noting that there had been a disclaimer of audit opinion. The principle of a unitary structure had never been put in place, so that the organisation still operated in a disjointed manner. This impacted directly on this disclaimer, which was the third successive disclaimer. The root causes included an inadequate document management system, capacity constraints, a non responsive financial system and decentralised finance function. SALGA had therefore embarked on various projects to try to attain a complete turnaround.

The financial highlights were tabled. Revenue had increased, and there was a 34% growth in total income, mainly due to accounting profit being “fair value” adjustments. There had been 17% reduction in overall expenditure. The organisation was now solvent. Working capital management remained steady. Most of the revenue was derived from membership levies on the 283 municipalities. Its largest expenditure lay in employee costs.

An analysis was given of performance versus budget. Negative income variance was due to donor funding not received because the contracts were not finalised. Capital expenditure was only R5.7 million instead of the budgeted R29.5 million because national office accommodation was not secured.

The key findings leading to the disclaimer were summarised, and the corrective measures being taken to address each were then set out in detail (see attached presentation).

DiscussionThe Chairperson directed several initial questions towards the delegation, querying the structures in place dealing with the critical issue of sustainability. The Chairperson believed that the issue of sustainability was not only critical but far reaching and must be addressed at all levels. Insufficient mention of the issue of sustainability had been made by SALGA in its report.

Mr George noted that the municipality had been debating issues on sustainability for a long time.The energy and sustainability issue was faced all over the world. SALGA and South Africa were not strangers to the debate of climate change. SALGA’sview of the current problem of the energy crisis was that South Africa should use this energy crisis to educate on conservation, and to stress the role that every individual member of society must play to conserve energy at home.One of the decisions dealt with education; The Department of Provincial and Local Government in Gauteng and other provinces would be convening an energy conference, to ensure these issues received special attention. Mr George noted that many stakeholders had begun to see the message of ‘cleaning’ as a country wide message, and this must extend to cleaning soccer fields and creating open areas, particularly in under privileged areas.

The Chairperson raised a query relating to the mixing of political and administrative issues. The Chairperson asserted that these two aspects should be separated.He highlighted the areas of advocacy, mandated participation and the large amount of resources that went into service delivery and suggested that there be some way to address these issues.The Chairperson noted that the presentation had not addressed the issue of gender equality, and urged SALGA to reconsider the importance of this issue. In addition he urged the Association to deal with the issue of disability. Both of these issues were not only topical, but also constitutional imperatives, and required further treatment in the report.Mr George noted that SALGA itself was amongst the first organisations to adopt parity in terms of gender, and this was included in its own constitution. The numbers within the SALGA organisation itself were somewhat lower, but this alone did not equate to gender inequality.However he did agree that these issues must receive more attention. The Chairperson, as a further comment to the issue of sustainability, requested that focus be aligned with recycling and appropriate measures in the same vein. Mr W Doman (DA) said that the presentation had noted that the issues of pension funds and outstanding law suits required special attention and care.Mr Doman then referred to pages 7 and 15 that further dealt with provincialisation of health care services and development of these issues.Mr Doman queried how SALGA presented its views on the issues to its members. Mr Doman further addressed the remuneration of councillors. This issue had been canvassed previously and the Committee had felt that SALGA had not lobbied and sufficiently asserted their ground regarding the remuneration.On the issue of communication and relationship between the Association and the members, Mr Doman queried the capacity of SALGA to support and advise its members. He drew attention to the recent centralisation of SALGA, and the ensuing problems.Mr Doman asked how SALGA was going to reconcile the difficulties of this centralisation in the year to come.

Mr George noted that SALGA had produced a booklet known as the Councillor’s Handbook. Unlike other spheres and levels of legislatures, councillors were in fact disadvantaged. The handbook did not provide a particular guide, but rather outlined a basic framework, detailing the conditions of service and so forth.He noted, however, that because of the gap in the councillors’ remuneration, the solution would lie in having a uniform document.He noted that perhaps the Portfolio Committee could become involved in the creation of such a uniform document and urged the Committee to consider that there was perhaps more room for further communication and co ordination to rectify this situation.

The Committee requested a copy of this handbook for the Portfolio Committee’s perusal.

Councillor Amos Masondo, Chairperson: SALGA, added that the role of the municipalities was also to fund SALGA, in amounts that varied according to several circumstances. Therefore the financial capacity of SALGA to implement policies and changes such as in councillors’ remuneration, was inhibited.He urged the Committee to assist in this varying financial capacity and help SALGA to seek the solution. He noted that indeed SALGA was trying to deal with the councillors’ remuneration.He suggested that another lobby be created to deal with this issue.

Mr Doman queried the figures concerning the income base for the municipalities and asked why there was such a variance between the figures.

Mr M Nonkonyana (ANC) began by extending thanks to the Association for their transparency.However he drew attention to the role of the audit committee, as set out on page 117 of the Annual Report, and asked for further clarity regarding the matter. He wanted clarity on the role and the frequency of its meeting, as also the relationship between the audit committees and the management of SALGA.He felt it strange that the audit committee had met twice in the previous financial year. This seemed to encourage intervention by the management. He expressed interest in hearing from the audit committee itself.Mr Lance Joel, Executive Director: Governance and Inter-governmental relations: SALGA informed the committee that the audit committee normally met four times a year, although last year it had not met a third time.He noted that further measures needed to be put in place to ensure transparency, and limit intervention by management.He noted that structural weaknesses had been identified and that they needed to not only be articulated but addressed.Mr P Smith (IFP) drew attention to the apparent inability of SALGA to support its five-year plan; and requested details on the specific areas of SALGA’s failure. The topical issue of electricity was canvassed with a query as to what role SALGA was playing in the current energy crisis of South Africa. Mr Smith noted the problem of high staff turnover faced by SALGA, and asked how SALGA hoped, in the light of this, to achieve the promises of efficiency.Councillor Masondo reaffirmed, in relation to electricity, that SALGA did in fact still listen and act upon the suggestions of the members to take the country forward.

The Chairperson noted that the question dealing with the energy crisis could only be dealt with within the constraints of the presentation, and it was not possible to deal with the current energy crisis facing South Africa, as this was not part of the report being discussed today.

Mr Smith asked how communication between SALGA and the municipalities could be improved, as the report had noted poor communication between the officers and the municipalities as a challenge. This was one of the primary roles of SALGA and poor interaction and failure to liaise with the municipalities and sensitise the different areas of government was undermining the primary goals of SALGA.An extension of this issue was the participation SALGA had with the Portfolio Committee. He said that SALGA must make further efforts to increase the participation with the Portfolio Committee.

Councillor Masondo noted that unfortunately communications were structured in a certain way that often resulted in certain complications. He was unable to further elaborate on this issue due to time constraints.Councillor Sophie Molokoane Machika, Chairperson for the Working Group on Finance, SALGA, commented briefly on a number of issues. She said that in the area of maintenance and development, provincial legislators had not taken aspects on board already in 2006. SALGA was assisting municipalities, with such assistance being in the initial stages, with substantial costs to be borne by all involved.She would like to request guidance on the improvement of the formula.In respect of staff disability, she requested that specific areas be highlighted and subsequently addressed.The Chairperson noted that time constraints had forced him to limit the questions, but asked that the delegates and the Committee Members should liaise with each other if there were additional questions in order to finalise further issues that were not able to be heard in this meeting.